January 08, 2023

Great Moments in Omnichannel History

More store closures from Macy's, who branded themselves nearly a decade ago as "America's Omnichannel Store" (click here). It's another Great Moment in Omnichannel History.

Retail goes through non-stop evolution. Small urban stores to large urban stores to suburban malls to big boxes to Target/Walmart to Dollar Stores, it always changes.

Over the next ten years, retail brands cannot have the enormous fixed costs of a store weighting them down. Cannot do it. Time tells us that we are going through an evolution ...

  • Past:  Fixed costs covered by purchases at good gross margins.
  • Recent Past:  Fixed costs covered by many purchases at low gross margins.
  • Future? Minimized variable costs, minimal fixed costs, recurring income.
Think about recurring income ... in e-commerce you have subscription brands who accomplish the goal of keeping dollars flowing every month. Amazon keeps dollars flowing every month via Prime ... you pay annually and then by golly you better use Amazon to get your money's worth, right?

Fixed costs are going away. This trend has been happening for 25 years.

Variable costs covered by recurring income is the future. It's gonna be darn hard for anybody to survive long-term, retailer or e-commerce brand, with 29% annual rebuy rates and 1.5 purchases per year.

Maybe the fundamental change that happened in 2022 wasn't that it became very hard to acquire new customers. Maybe the fundamental change that carries into 2023 is the end of a fixed cost model paired with marginal rebuy rates (i.e. < 40%) requiring inexpensive customer acquisition.

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